Tag Archives: Market Trends

A Mile-High Building Boom in Denver (Realtor.com)

As Denver market continues to grow so will ours here in Summit County. 

A Mile-High Building Boom in Denver 

 | Oct 13, 2017

A booming tech industry and strong job market have fueled an apartment-building frenzy in the midsize, mile-high city of Denver. Neighborhoods once filled with rundown 19th-century warehouses, modest apartment complexes and vacant lots have transformed into landscapes of glass, brick and steel, as new structures continue to climb.

Standing on the 12th-floor roof deck of the Alexan Uptown, a new 372-unit luxury apartment building, real-state agent Justin De La O counts about half a dozen cranes within a few blocks’ radius that mark where similar properties are rising.

Median rents in Denver grew to $1,184 in 2015, up from $777 in 2005—a 52% increase, according to data from rental website Apartment List, compared with 32% nationally. Construction of new units boomed during the same decade, but remained slower than the pace of new job creation, with 1.7 new jobs created for every new residential building permit. From 2010 to 2015, the ratio was particularly off-balance, with 2.9 jobs added for every building permit, according to census data analyzed by Apartment List.

Now, some local real-estate experts say the balance is shifting, with the supply of new housing matching or even exceeding demand. The result: Rental-price growth already shows signs of softening, with median rents down 0.4% over the past month, to $1,340, according to Apartment List’s October report. (The company says this may be due in part to a seasonal dip.)

“They have totally overbuilt the luxury apartment buildings,” says Christina Freyer Walker, the president of Colorado & Co. Real Estate. That’s good news for renters, as some buildings begin to offer incentives such as $500 signing bonuses, elaborate furnishing packages, gift cards and breaks on rent to attract tenants.

Tori Larson is the asset manager for the developer behind Decatur Point, a 203-unit rental building with an outdoor pool that opened in November 2016 and is now 88% rented. She says the building has tried a range of promotions to attract renters.

One recent deal was aimed at pet owners; it included a gift card for 10 visits to a doggy day care and six months of monthly on-site pet grooming. Another promotion featured a $500 Visa gift card, which she said was popular. “It’s a constant battle trying to figure out what’s going to work and what’s going to attract people,” she says. Studios in the building start at $1,485 a month; two-bedroom, two-bathroom units go up to $2,700.

Leeann Nicolo moved to Denver from New York in June. She looked at about 15 different places before choosing her 950-square-foot unit at the Alexan Uptown. At the time she signed her lease, she says the building was offering one-month free rent and waiving the building’s standard pet fee for a few months. The signing package for her $1,950-a-month, one-bedroom apartment also included several gift options. She chose one that came with a $300 Southwest Airlines gift card, a free membership to the Denver Zoo and a subscription a service that delivers free snacks from around the world once a month.

“In New York you have to argue for everything and you’re lucky if you even get an apartment,” says Ms. Nicolo, 27, who works in cybersecurity. The building’s more recent promotion included waived signing fees and discounts on certain units.

The rental-building boom was partly fueled by a slowdown in the building of for-sale luxury condos. Some developers say that under local construction-defect laws, condos are more vulnerable to lawsuits than rental buildings, making rentals seem like a safer bet. Others say that market conditions have been more favorable for rentals.

The low inventory of homes for sale has kept the sales market competitive. Denver homes and condos sell in under 30 days on average after listing, on par with hot markets like the San Francisco Bay Area, says Pam O’Connor, the CEO of Leading Real Estate Companies of the World.

David Zucker, the CEO of Zocalo Community Development, says the past year has given him pause about the high end of the rental market, though Denver’s growing global recognition makes him optimistic about the city overall. The company’s newest luxury rental building, Coda, in Cherry Creek, is about 70% rented a year after opening, which he says is slightly slower than expected but not surprising, considering the competition.

The building has free gigabyte high-speed internet for all residents, in addition to concierge service and a new ground-floor restaurant, Hedge Row, owned by Elon Musk’s brother Kimbal Musk. For future development, he says, he’s focusing on mixed-use buildings.

Some buildings are trying to stand out with increasingly luxurious amenities. At the Battery on Blake, a luxury apartment building across the street from Coors Field, there’s a sports lounge with an indoor bowling alley and billiards. Many buildings also include dog spas (where renters can wash their pets) as well as rooftop dog parks or dog runs. And then there are the types of amenities that are unique to Denver’s outdoorsy lifestyle, like ski-storage rooms, or kayaks that residents can borrow to use on nearby rivers.

The Confluence, a 35-story building under construction at the convergence of Cherry Creek and the South Platte River, has units that range from 658-square-foot studios to 2,500-square-foot penthouses. Amenities include bikes that residents can borrow to ride around town, as well as valet parking. A heated outdoor infinity pool, open year-round, has a cantilevered glass wall as well as several resort-style cabanas, each with its own fire pit. The gym has sliding glass doors that open to an outdoor yoga lawn.

One-bedrooms at the Confluence start around $2,400 a month and the largest penthouses could rent for more than $16,000 a month; prices are still being determined. With hand-scraped wood floors and 10- to 12-foot ceilings, the units are some of the priciest per square foot in Denver. Developers say there’s already a waitlist for penthouses, although they’re still under construction. They aren’t offering big promotions yet, though some non-penthouse units come with a $500 to $1,000 “construction” rebate while the building is still being completed.

Tara Nelson, a 32-year-old registered dietitian, moved to Denver from Barnstable, Mass., in May. She looked at seven or eight different luxury buildings before settling on Decatur Point in Jefferson Park. She liked the building’s gym, which has Peloton bikes with live video spin classes, and free yoga classes twice a week. Her 630-square-foot studio apartment has a patio where she can watch the sunset in the evenings.

Her rent is $1,700 a month, but with the building’s one-month free move-in incentive, which she spread out over the first year, she pays $1,595; she says her application fee was also waived.

Developers and real-estate agents say the next boom will likely happen in the suburbs. Adrienne Hill, a senior vice president with Simpson Property Group, has developed buildings like Sky House, a new 25-story, 354-unit downtown luxury apartment building in the Financial District with a rooftop pool and a gym that has a virtual training center. The building opened in October 2016 and is 64% occupied, which Ms. Hill says is in line with their expectations.

With the urban market nearly saturated, the company is looking to suburban areas like Littleton, about 20 miles south of Denver, for new development. “There’s a lot of opportunity in the suburbs and a lot of pent-up demand,” she says.


The 5 Real Estate Trends That Will Shape 2016

Yes, you read that right. 2016 is right around the corner and Realtor.com is highlighting 5 of the trends that will shape next year. One of Jonathan Smoke ‘s points is that “Generational shuffle will make 2016 the best year to sell in the near future.” So get ready to sell or to buy in 2016 it should be a good year. 

The 5 Real Estate Trends That Will Shape 2016

House: RiverNorthPhotography/iStock; numbers: mishabokovan/iStock

Jonathan Smoke

It’s almost the new year. Get ready to break out the Cristal: We had a great 2015—the best year for housing since 2007. And our forecast here at realtor.com® projects an even better year in 2016.

How so? Well, with economic growth chugging along, employment will continue to increase, meaning that people will have more money coming in and they’ll be able to buy their first home or upgrade to a new one.

Here’s a closer look at the trends that will have the greatest impact on the housing market in 2016.

1. We’ll return to normal (Anyone remember normal?)

The year ahead will see healthy growth in home sales and prices, but at a slower pace than in 2015. This slowdown is not an indication of a problem—it’s just a return to normalcy. We’ve lived through 15 years of truly abnormal trends, and after working off the devastating effects of the housing bust, we’re finally seeing signs of more normal conditions. Distress sales will no longer be playing an outsized role, new construction is returning to more traditional levels, and prices rise at more normal rates consistent with a more balanced market.

2. Generational shuffle will make 2016 the best year to sell in the near future

Millennials emerged as a dominant force in 2015, representing almost 2 million sales, which is more than one-third of the total. This pattern will continue in 2016 as their large numbers combined with improving personal financial conditions will enable enough buyers between ages 25 and 34 to move the market—again. The majority of those buyers will be first-timers, but that will require other generations to also play larger roles.

Two other generations will also affect the market in 2016: financially recovering Gen Xers and older boomers thinking about or entering retirement. Since most of these people are already homeowners, they’ll play a double role, boosting the market as both sellers and buyers. Gen Xers are in their prime earning years and thus able to relocate to better neighborhoods for their families. Older boomers are approaching (or already in) retirement and seeking to downsize and lock in a lower cost of living. Together, these two generations will provide much of the suburban inventory that millennials desire to start their own families.

Assuming that most of these households will both sell and buy, it is important to recognize that 2016 is shaping up to be the best year in recent memory to sell. Supply remains very tight, so inventory is moving faster. Given the forecast that price appreciation will slow in 2016 to a more normal rate of growth, delaying will not produce substantially higher values, and will also see higher mortgage rates on any new purchase.

3. Builders will focus on more affordable price points

One aspect of housing that has not recovered yet has been single-family construction. Facing higher land costs, limited labor, and worries about depth of demand in the entry-level market, builders have shifted to producing more higher-priced housing units for a reliable pool of customers. That focus caused new-home prices to rise much faster than existing-home prices. Builders were able to be profitable and grow by following this move-up and luxury strategy, but their growth potential was limited by avoiding the entry level. That should begin to change in 2016.

We are already seeing a decline in new-home prices for new contracts signed this fall. In addition, credit access is improving enough to make the first-time buyer segment more attractive to builders. We’re looking for the strong growth in new-home sales and single-family construction as builders offer more affordable product in the year ahead. Consumers of all types should consider new homes, but availability will be highly dependent on location.

4. Higher mortgage rates will affect high-cost markets the most

We told you mortgage rates would go up in 2015, and they did—but they also went back down. We expect similar volatility in 2016, but the move by the Federal Reserve to guide interest rates higher should result in a more reliable upward trend in mortgage rates.

Thirty-year fixed rates will likely end 2016 about 60 basis points higher than they are today. That level of increase is manageable, as consumers will have multiple tactics to mitigate some of that increase. However, higher rates will drive monthly payments higher, and, along with that, debt-to-income ratios will also go higher. Markets with the highest prices will see that higher rates will result in fewer sales; however, across the U.S., the effect will be minimal as the move to higher rates will spur more existing homeowners to sell and buy before rates go even higher.

5. Already unaffordable rents will go up more than home prices

The housing crisis that politicians are ignoring is that the cost of rental housing has become crushing in most of the country. More than 85% of U.S. markets have rents that exceed 30% of the income of renting households. Furthermore, rents are accelerating at a more rapid pace than home prices, which are moderating. We’ve been seeing asking rents on vacant units increase at a double-digit pace in the second half of this year.

Because of this, it is more affordable to buy in more than three-quarters of the U.S. However, for the majority of renting households, buying is not a near-term option due to poor household credit scores, limited savings, and lack of documentable stable income of the kind necessary to qualify for a mortgage today.

This trend does not bode well for the health of the housing market in the future. It will only improve if we see more construction of affordable rental housing as well as more of a pathway for renters to become homeowners.

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